Intro to Retirement Plans
The perks of owning your own business are bountiful but one question many S Corp owners have is how to contribute to their retirement. Here are the plans that our members have found most beneficial to them as an S Corp owner.
- Solo 401(k) is a retirement saving and investment plan employers can offer that provides employees a tax deferral on money contributed. With a Solo 401(k), a self-employed business owner can make contributions as both the employee and the employer. You can even deduct your employer contributions as a benefits expense.For more information on Solo 401(k) plans, you can visit the IRS website.
- A Simplified Employee Pension Plan (SEP IRA) is a traditional IRA for self-employed individuals and small-business owners. A SEP IRA is typically very low cost, and easy to implement. The SEP IRA can be a great alternative for making tax-deductible contributions because it allows business owners to contribute more than some other retirement options.
For more on retirement options, here’s a comprehensive list of Self-Employed Retirement Plans
Why use a Retirement Plan for your Business
S Corp owners benefit greatly from contributing and these benefits can extend to your personal and business taxes. For example, with a Solo 401(k), your employee contributions can be made on a pre-tax basis, which defers your taxable liability, and your employer contributions are a deductible expense of the business, also reducing your taxable liability. All while helping you plan for your future!
Not all Retirement Plans are Built the Same
Your S Corp will not benefit from a Roth or Traditional IRA. Contributions to Roth and Traditional IRAs should be paid from a personal account that isn’t connected to your S Corp. Contributions will still be reported on your personal tax return, so please tell your privider about them before the end of the year.
Remember: Once you’ve chosen your retirement account and start to contribute, the employer contributions should be coming out of your business account.
